Elections in Chile: The return of the right

In this primer on upcoming elections in Chile, GRI’s Niall Walsh examines Sunday’s likely winner and the long-term trends at play during the election.

On 19 November Chileans will go to the polls to elect a new president. Amid the unpopularity of the current government and the lack unity on the left, it appears likely that the billionaire conservative and former President Sebastian Pinera will be elected. The prospect of Pinera’s election will be welcomed by investors. However, potential social unrest and Chile’s lack of political alternatives could pose a threat to the stability of Latin America’s most developed country.

Economic difficulties

Economic challenges and the underperformance of the Chilean economy in recent years have resulted in growing disapproval of the current government. Poor growth rates and political friction have plagued Michelle Bachelet’s second term as president. This has served to diminish electoral support for the ‘New Majority’ ruling coalition while simultaneously boosting support for businessman Pinera.

In Bachelet’s initial two years, the Chilean economy only grew at a rate of 1.5% per year. Under the current government, economic growth would likely remain low – the IMF predicts that Chile will only grow by 2.3% annually over the next four years.

Poor economic results reflects below-par investments in the country’s main assets. This has had a negative impact on the political front, creating a conflict of interest within the government’s cabinet. In August, the executive authority ordered the termination of an iron-ore project worth $2.5 billion. Although the President has defended her decision on environmental grounds, it has resulted in serious internal distrust concerning economic investment.

The Dominga mining scandal, as it is known as, led to the resignation of key members of the cabinet in La Moneda Palace, the seat of Chile’s Presidency. One of the most significant departures was Finance Minister Rodrigo Valdes, who questioned the government’s ‘discipline and conviction’ required to stimulate growth.

Investors are also worried due to a lack of stability in the cabinet. Nicolas Eyzaguirre has been appointed the new Finance Minister for a second time; he is the third individual to occupy the role in the last four years. With Chile on the verge of new elections, it is likely the role will change hands again. Moreover, internal conflict and La Moneda’s failure to implement social reforms has eroded support for the President as the electorate demand unity and stability.

Pinera 2.0

Bachelet’s disappointing second term is a key factor in the rise in support for former president Sebastián Pinera. According to top Chilean pollster MORI, the businessman-turned-politician is set to win 44% of the vote in the first round of elections. He has a convincing lead over his opponents – Alejandro Guiller and Beatriz Sanchez – who stand at 30% and 11%, respectfully. A candidate must win 50% of the vote to win in the first round, and the polls may change the elections approach. However, Pinera’s major lead coupled with his electoral experience make him a favorite to win in the second round.

Pinera’s pro-business background is likely to restore investor faith in the Chilean economy. The conservative politician, whose business empire includes Chile’s top airline, top football team, and a television station, is regarded as a safe choice to reenergise and stabilise the national economy.

In Pinera’s first term, high prices for copper – which accounts for around half of Chile’s exports – resulted in 5% annual growth in the economy. These high levels of growth stand in stark contrast to the economic difficulties of the Bachelet administration. During 2014 – 2017, copper prices were relatively low, which contributed towards low economic growth. The prospect of Pinera’s return has already boosted market confidence in Chile, as copper prices are expected to accelerate. According to the economist Ana Madeira, the Chilean electorate want ‘stability and moderate change’.

Although Pinera’s conservative politics and support for the free market may result in stability and economic growth, his party, Vamos Chile, must expand its support base in order to avoid political challenges. Pinera has shown signs of doing this through his environmentally friendly economic goal. If elected, the businessman aims for complete dependence on renewable energy in Chile by 2040. This would both please environmentalists and increase opportunities for green energy firms in the Latin American country.

Political disenchantment and the lack of alternatives

Although the election of Pinera would likely stimulate the Chilean economy, low social confidence in the country’s political system could pose a threat to the long-term stability of the country. Due to inter-party conflict and the lack of credible political alternatives, there is a growing disenchantment with politics in Chilean society.

According to the International Institute for Democracy and Electoral Assistance, only 42% of the Chilean electorate would vote in an election. Similarly, the Centro de Estudios Públicos conducted a poll in September and October which found that only 43% of Chileans would vote in the election, marking an unprecedented period of political disengagement. This low voter turnout will likely benefit Pinera. According to Tresquintos analyst Keneth Bunker, ”many left-wing voters are not going to vote in the second round because their candidate will have been eliminated”. This is compounded by profound divisions on the left due to economic disagreements and the failure of social reforms.

A lack of political alternatives in Chile is an important cause of political disengagement and reflects a wider issue that runs at the core of many Latin American countries. Several countries, such as Brazil and Argentina, allow for consecutive presidential terms. This has facilitated the concentration of power in a few hands.

In Chile, candidates are allowed to serve two terms, but they cannot be consecutive. However, this has not diminished the political dominance of the same candidates that sections that Chilean society have become disillusioned with. If Pinera is elected, it would mean that only two presidents have occupied La Moneda in 16 years.

The potential election of Sebastían Pinera would likely boost the national economy and increase investor confidence in the Latin American country. However, if challenges emerge and his support declines, it will likely reinvigorate the left and serve the narrative of those disengaged with the political system.

About Author

Niall Walsh is a political risk analyst for GRI. He holds a BA in History and Spanish from University College Dublin and an MA in International Relations from Leiden University. His main focus concerns national and regional political risk in Latin America.